#### Cleveland Osteopathic Hospital, Appellant, *v.*Zangerle, Aud., et al., Appellees.

*223(No. 31960

Decided March 15, 1950.)

*225
      *Messrs. Leckie, McCreary, Schlitz é Hinslea*and *Mr. Arthur E. Petersilge,*for appellant.

*Mr. Herbert 8. Duffy,*attorney general, *Mr. Donald B. Leach, Mr. Franklin T. Gullitan,*prosecuting attorney, and *Mr. George W. Leddon,*for appellees.

Zimmerman, J.

On the present appeal, it becomes the duty of this court to decide the ultimate question whether *under the evidence adduced in this particular case,*the decision of the board is unreasonable or unlawful.

In the hearing before the board and on the presentation of this appeal, the hospital relies wholly on that part of Section 5353, General Code, which reads:

> “Eeal and tangible personal property belonging to institutions used exclusively for charitable purposes, shall be exempt from taxation. ’ ’

Ba,sed on the theory that all property should bear its proportionate share of the costs of government and property should be absolved from such obligation only for good cause, taxation is the rule and exemption the exception. Hence, one seeking to have property relieved from taxes has the burden of showing that such property comes squarely within the intent arid meaning of exemption provisions. See *Crown Hill Cemetery Assn.*v. *Evatt, Tax Commr.,*143 Ohio St., 399, 55 N. E. (2d), 660; *Welfare Federation of Cleveland*v. *Glander, Tax Commr.,*146 Ohio St., 146, 174, 64 N. E. (2d), 813, 825; *Battelle Memorial Institute*v. *Dunn, Aud.,*148 Ohio St., 53, 59, 60, 73 N. E. (2d), 88, 91.

It seems obvious that no single test is dispositive of whether a hospital, for example, is being conducted *226
      *exclusively*as a charitable project. All the facts in each individual case must be assembled and examined in their entirety and the substance of the scheme or plan of operation exhibited thereby will determine whether the institution involved is entitled to have its property freed from taxes.

An illustration of the above statement is to be found in the cases of *American Issue Publishing Co.*v. *Evatt, Tax Commr.,*137 Ohio St., 264, 28 N. E. (2d), 613, where under the peculiar facts of that case the property of a printing plant was held entitled to tax exemption and *Zindorf*v. *Otterbein Press,*138 Ohio St., 287, 34 N. E. (2d), 748, where under the peculiar facts of that case the property of another printing establishment was held subject to taxation, principally because it was in competition with other concerns engaged in commercial printing and because a profit motive was plainly discernible from the manner in which it ran its business. Compare, *Incorporated Trustees of the Gospel Workers Society v. Evatt, Tax Commr.,*140 Ohio St., 185, 42 N. E. (2d), 900.

To the writer, at least, the adjective “charitable” attached to “hospital” conveys the idea of a place where service and assistance are given the sick, injured and ailing, with open doors and benevolent concern for afflicted souls who lack the ability to pay for the attentions they receive.

Predicated upon language used in the opinion in the case of *O’Brien, Treas.,*v. *Physicians Hospital Assn., 96*Ohio St., 1, 116 N. E., 975, L. R. A. 1917F, 741, and in accordance with the concept of an organization devoted *exclusively*to charitable purposes, a hospital to qualify as a charitable institution, the property of which is exempt from taxation, should have as an important objective the care of the poor, needy and distressed who are unable to pay, although the fact that it admits and ministers to a number of pay patients *227will not necessarily destroy its charitable character. See *Trust Company of Georgia*v. *Williams,*184 Ga., 706, 192 S. E., 913.

Bnt where a hospital extends its facilities and services very largely to those who are able to and do pay the established rates for their accommodation and *designedly makes a very substantial profit*in so doing, it places itself in the classification of a business enterprise amenable to taxation, notwithstanding that some unfortunate persons without means are cared for free of charge. See 51 American Jurisprudence, 607, Section 635.

In the instant case it is plain from the figures presented that services and accommodations of all kinds for which charges were made and collected greatly exceeded the services performed and the accommodations furnished without charge and that by the procedure adopted and followed the pecuniary gain to the hospital was considerable.

The bare fact that a hospital devotes the profits it makes from the conduct of its affairs to paying off indebtedness and to improving and enlarging its plant does not of itself place it in the category of a tax exempt charitable institution. It is the use of the property and not the use of the proceeds derived therefrom which is determinative of the question of tax exemption. See *Benjamin Rose Institute*v. *Myers, Treas.,*92 Ohio St., 252, 110 N. E., 924, L. R. A. 1916D, 1170; *Incorporated Trustees of Gospel Workers Society*v. *Evatt, Tax Commr., supra; Burns*v. *Glander, Tax Commr.,*146 Ohio St., 198, 64 N. E. (2d), 678; *Battelle Memorial Institute*v. *Dunn, Aud., supra*(148 Ohio St., 53, 61, 73 N. E. [2d], 88, 92); *New Orphans’ Asylum of Colored Children of Cincinnati*v. *Board of Tax Appeals,*150 Ohio St., 219, 223, 80 N. E. (2d), 761, 763.

One recognized test for ascertaining whether a hospital is charitable or otherwise is whether it is main*228tained and conducted for gain, profit or advantage. 14 Corpus Juris Secundum, “Charities,” 422, Section 2. And this is a question of fact in each individual case. *Hamilton*v. *Corvallis General Hospital Assn.,*146 Ore., 168, 30 P. (2d), 9.

It has been held that if the books of a hospital show a substantial profit, that is a circumstance tending to negative the idea that it is a benevolent institution. *Prairie du Chien Sanitarium Co.*v. *City of Prairie du Chien,*242 Wis., 262, 7 N. W. (2d), 832, 144 A. L. R., 1480.

In 2 Restatement of Trusts, 1167, Section 376, under Comment *b.,*is the following language:

“The mere fact that persons who are not objects of charity incidentally benefit from the maintenance of a charitable institution does not prevent the institution from being charitable. Thus, an institution for the promotion of charitable purposes is charitable although salaries are paid to its managers, officers and employees. *If, however, the fixing of a salary is merely a. device for securing the profits of the institution and not merely compensation for services rendered, the institution is not a charitable*institution.” (Emphasis ours.)

Here, the compensation paid the physicians and surgeons working as employees of the hospital was a good deal less than the returns which the hospital enjoyed by reason of the services performed for its benefit by such physicians and surgeons. As a matter of fact, the amounts collected by the hospital for these services contributed in an appreciable degree to the tidy profit it garnered in 1948.

As concerns the problem of tax exemption in Ohio, cases from other jurisdictions are ordinarily not very helpful, because, more often than not, the tax-exemption provisions under which they were decided differ *229materially from the provisions on the same general subject obtaining in this state.

In the pending controversy, the Board of Tax Appeals found as a fact that the use made of the property for which tax exemption is sought did not bring it within the applicable exemption provisions of Section 5353, General Code, and rendered its decision accordingly. A majority of this court is of the opinion that such decision is not unreasonable or unlawful, under all the facts and circumstances developed, and it is therefore affirmed.

*Decision affirmed.*

Weygandt, C. J., Matthias and Turner, JJ., concur.

Hart, Stewart and Taft, JJ., dissent.

Taft, J.,

dissenting. The facts in this case as supported by the record and the findings of the Board of Tax Appeals thereon, were stated by the board as follows:

> “The institution is incorporated not for profit.

> “In all matters and things save in two respects the property of this institution and its manner of use and operation is comparable to other exempted hospital property and would be entitled to the same privilege of exemption.

> “Instead of reciting all of the facts we deem it wise to fully set forth wherein the properties’ use differs from other hospitals. This institution encountered financial obstacles in attempting to secure funds to purchase its present site, remodel the building thereon and for its equipment. The osteopathic fraternity of Cleveland and vicinity sponsoring its aims, when banks and other financial institutions refused to advance funds, by donations and personal loans to it, provided the funds to make the institution possible. In order that these loans might be repaid *230and supply house credits extended be liquidated, this fraternity devised the plan of employing some of its doctor members upon a monthly salary averaging $1,000 a month. All services rendered by them within and without the hospital were and are paid for directly to the hospital. These doctors make no independent charge therefor. The hospital receives all the earnings they produce. They have, in fact, retired from private practice. This plan has worked to the extent that the hospital’s operation for the year 1948 shows a net profit of $111,007.06. It is evidenced that the first six months of 1949 show comparable earnings. These earnings are being used to liquidate the institution’s construction and equipment indebtedness.

> “The evidence produces another fact that the applicant intends to pursue this policy after these debts are paid for the purpose of providing funds for further enlargement and betterment of its hospital facilities.

> “It is clear, from the statement made of the facts unhesitatingly disclosed, that although this property is in part used for the dispensing of charity, it is being so used as to produce a profit from its operation and that the income or earnings are being used in freeing the institution of debt. ’ ’

The record further shows, without dispute, that the arrangement made with these doctors (herein referred to as the doctors) clearly represented a great financial sacrifice by them.

As the Board of Tax Appeals stated, if this arrangement had not been made so that appellant’s receipts exceeded its expenditures in 1948, the board would have found appellant entitled to tax exemption.

As shown by the figures in the statement of facts prepared by the majority and recognized by the statements in the majority opinion, the doctors, instead of receiving $182,000 during the year for their services, *231received only $81,000. This difference of $101,000 obviously represents the contribution to the hospital of their services to the extent of that dollar amount.

Heretofore, this court has always recognized that the mere fact, that a profit is realized from the operations of an enterprise, does not mean that such enterprise is not operating exclusively for charitable purposes if such profit is devoted to the charitable purposes of the enterprises. *American Issue Publishing Co.*v. *Evatt, Tax Commr.,*137 Ohio St., 264, 28 N. E. (2d), 613; *Cullen*v. *Schmit,*139 Ohio St., 194, 39 N. E. (2d), 146; *Am. Jersey Cattle Club*v. *Glander, Tax Commr.,*152 Ohio St., 506, 513. See *O’Brien, Treas.,*v. *Physician’s Hospital,*96 Ohio St., 1, 116 N. E., 975, L. R. A. 1917F, 741 (syllabus five); *Taylor, Admr.,*v. *Protestant Hospital Assn.,*85 Ohio St., 90, 99, 96 N. E., 1089, 39 L. R. A. (N. S.), 427.

This conclusion was clearly recognized by the General Assembly in its enactment of Section 5328-la, General Code, in 1945, at the time when it amended Section 5353, General Code.

Authorities outside Ohio uniformly sustain this conclusion. *Nuns of Third Order of St. Dominic*v. *Younkin, Clerk,*118 Kan., 554, 235 P., 869; *Baylor University*v. *Boyd*(Texas Civil Appeals), 18 S. W. (2d), 700; *Butterworth et al., Exrs.,*v. *Keeler,*219 N. Y., 446, 114 N. E., 803; *In re Estate of Rust,*168 Wash., 344, 12 P. (2d), 396; *Virginia Masonic Hospital Assn. v. Larson,*9 Wash. (2d), 284, 114 P. (2d), 976; *Weiss*v. *Swedish Hospital,*16 Wash. (2d), 446, 133 P. (2d), 978; *In re Estate of Bailey,*19 Cal. App. (2d), 135, 65 P. (2d), 102; *New England Sanitarium*v. *Stoneham,*205 Mass., 335, 91 N. E., 385; *Bd. of Commrs. of Tulsa County*v. *Sisters of the Sorrowful Mother,*141 Okla., 32, 283 P., 984. See, also, 51 American Jurisprudence, 608, Section 638; 3 Scott on Trusts, 2033, Sec*232tion 376, 14 Corpus Juris Secundum, 423, 424, Section 2.

None of the cases cited in the majority opinion tends to support a contrary conclusion. In *Incorporated Trustees of the Gospel Workers Society*v. *Evatt, Tax Commr.,*140 Ohio St., 185, 42 N. E. (2d), 900, it was held that the use of the premises for living quarters was the factor which prevented tax exemption. In *Zindorf*v. *Otterbein Press,*138 Ohio St., 287, 34 N. E. (2d), 748; *Benj. Rose Inst.*v. *Myers, Treas.,*92 Ohio St., 252, 110 N. E., 924, L. R. A. 1916D, 1170; and *Battelle Memorial Institute*v. *Dunn,*148 Ohio St., 53, 73 N. E. (2d), 88, tax exemptions were denied because of uses of the property involved for commercial purposes. The tax exemption sought in *New Orphans’ Asylum of Colored Children of Cincinnati*v. *Bd. of Tax Appeals,*150 Ohio St., 219, 80 N. E. (2d), 761, was allowed. In *Trust Co. of Georgia*v. *Williams,*184 Ga., 706, 192 S. E., 913, unlike the instant case, the hospital was to be open only to those who paid for its services. *Hamilton*v. *Corvallis Genl. Hospital Assn.,*146 Ore., 168, 30 P. (2d), 9; *Prairie du Chien Sanitarium Co. v. City of Prairie du Chien,*242 Wis., 262, 7 N. W. (2d), 832, 144 A. L. R., 1480, and the underlined portions, quoted in the majority opinion from Comment b, under 2 Restatement of Trusts, 1167, Section 376, involved situations where the hospital or other institution was used as a device to provide profit for its members or promoters. This is the reverse of the instant case where the promoters (the doctors) are used by the hospital to provide funds for its charitable operations.

It is submitted that the more nearly applicable portion of the Restatement is the subsequent Comment d following the Comment b quoted in the majority opinion. Such Comment d reads in part:

> *233
>       *“A*charitable trust does not cease to be such merely because its operation results in a profit, provided that the profits are to be applied only to charitable purposes. It is only when the profits may be applied to private purposes that the trust ceases to be charitable. The trust is charitable whether the profits are to be used for the purposes of the undertaking producing the profits or for other charitable purposes.”

The majority opinion seems to have overlooked that there is a sound legislative reason for granting tax exemption to “property belonging to institutions used exclusively for charitable purposes.” The words “charitable purposes” are usually understood to include those purposes, the accomplishment of which is beneficial to the community. *Cleveland Bible College*v. *Board of Tax Appeals,*151 Ohio St., 258, 264, 85 N. E. (2d), 284; *Waddell, a Minor,*v. *Y. W. C. A.,*133 Ohio St., 601, 604, 15 N. E. (2d), 140; 2 Restatement of Trusts, Section 368 and Comment b thereon. When it provides for their tax exemption, the General Assembly merely recognizes in a small way the obligation which the state owes to institutions devoted to charitable purposes. 51 American Jurisprudence, 510, Section 504; *Cedars of Lebanon Hospital*v. *Los Angeles County*(Cal. Dist. Ct. of App.), 206 P. (2d), 915; *Myers, Treas.,*v. *Benjamin Rose Institute,*92 Ohio St., 238, 251, 110 N. E., 929.

It might well be argued that, as to hospitals in this state not used as devices to provide profits for stockholders or other individuals, they are of sufficient benefit to the community to justify their treatment as charitable institutions, even if (as they are not in the instant case) all patients are required to pay for the services received from such hospitals. *Weiss*v. *Swedish Hospital, supra,*at 451. This is especially true in Ohio where most communities are sorely in need of adequate or even some hospital accommodations.

*234In the instant case, if, instead of devoting over $100,-000 of their services to the hospital in 1948 and thereby enabling the hospital to have snch an excess of receipts from operations over disbursements, these doctors had contributed that sum in money as a gift to the hospital, no question of its tax exemption could have been raised without specifically overruling previous decisions of this court. *O’Brien, Treas.,*v. *Physician’s Hospital, supra; College Preparatory School for Girls*v. *Evatt, Tax Comonr.,*144 Ohio St., 408, 59 N. E. (2d), 142; *Taylor, Admr.,*v. *Protestant Hospital Assn., supra.*The interest of the community in having such a hospital is just as great where donations in cash are not available as where they are. That interest is the interest which justifies classification, of the hospital as a charity and enables it to secure the tax exemption provided by the General Assembly.

No institution, even a charitable one, can operate at a loss indefinitely. Where cash donations are not available to make up for operating losses, the need of tax exemption is greater than where such donations are available. The mere facts, that a hospital is operated efficiently within its income and supported in part by donations of services instead of cash, should not prevent it from receiving tax exemption. Any distinction between donations of money and donations of services would appear to be a distinction without a difference.

Hart and Stewart, JJ., concur in the foregoing dissenting opinion.